Inequality, Institutions, and Informality

29 Pages Posted: 25 Apr 2011

See all articles by Alberto Chong

Alberto Chong

University of Ottawa

Mark Gradstein

Ben-Gurion University of the Negev - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR); World Bank - Development Research Group (DECRG)

Date Written: September 2004

Abstract

This paper presents theory and evidence on the determinants of the size of the informal sector. We propose a simple theoretical model in which the informal sector`s size is negatively related to institutional quality and positively related to income inequality. These predictions are then empirically validated using different proxies of the size of the informal sector, income inequality, and institutional quality. The results are shown to be robust with respect to a variety of econometric specifications.

Suggested Citation

Chong, Alberto and Gradstein, Mark, Inequality, Institutions, and Informality (September 2004). IDB Working Paper No. 427, Available at SSRN: https://ssrn.com/abstract=1818716 or http://dx.doi.org/10.2139/ssrn.1818716

Alberto Chong (Contact Author)

University of Ottawa ( email )

2292 Edwin Crescent
Ottawa, Ontario K2C 1H7
Canada

Mark Gradstein

Ben-Gurion University of the Negev - Department of Economics ( email )

Beer-Sheva 84105
Israel
+97 2 8647 2288 (Phone)
+97 2 8647 2941 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.cesifo.de

Centre for Economic Policy Research (CEPR)

London
United Kingdom

World Bank - Development Research Group (DECRG)

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

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